Review of Economic Development Concepts

This flashcard set covers key vocabulary and definitions related to concepts of economic development, prosperity, and the influence of geography, culture, and institutions on economic outcomes.

Proximate Causes of Prosperity

High levels of factors of production, such as physical capital, human capital, and technology that result in high GDP per capita.

Fundamental Causes of Prosperity

Root reasons for differences in the proximate causes, acting as deep determinants of economic development.

Geography Hypothesis

Claims that differences in geography, climate, and ecology are responsible for differences in prosperity.

Culture Hypothesis

Argues that different values and cultural beliefs are responsible for differences in prosperity.

Institutions Hypothesis

Claims that differences in the organization of society and governance lead to differences in prosperity.

Extractive Economic Institutions

Institutions that do not protect property rights, hinder economic transactions, and restrict market entry.

Inclusive Economic Institutions

Institutions that support economic transactions by protecting property rights and allowing free market activities.

Creative Destruction

The process where economic growth destabilizes existing regimes, leading to shifts in political power.

Reversal of Fortune

Refers to the phenomenon where former colonies that were poor in 1500 are now rich, while those that were rich are poor today.

Evidence-Based Economics

Utilizes empirical data to understand economic phenomena and relationships, such as the impact of geography on poverty.

Foreign Aid Effectiveness

Critiques argue that foreign aid is often ineffective due to corruption and failure to address fundamental causes of poverty.